French company with Spanish subsidiary: who manages the finance?

A Spanish subsidiary of a French company keeps its own accounts according to the Spanish accounting plan, files its accounts with the Registro Mercantil and pays corporate tax in Spain - but its financial management falls to the group: consolidation, intra-group cash flow and transfer prices are decided by the parent company.

This is the distribution that many managers discover after the fact: opening an SL in Barcelona creates a Spanish company in its own right, with its own obligations, without relieving France of anything. Here's who should do what, on both sides of the border.

What the subsidiary must do in Spain

A Spanish SL (sociedad limitada) is subject to local obligations, regardless of the nationality of its shareholder:

• Accounting in the Spanish chart of accounts (Plan General Contable), held locally, generally by a gestoría or a Spanish firm;
• Submission of annual accounts to the Registro Mercantil and legalization of accounting books;
• Spanish corporate tax (Impuesto sobre Sociedades) on the profits of the subsidiary;
• Spanish VAT (IVA) and periodic declarations, plus intra-community statements if the subsidiary invoices or purchases in France;
• Spanish social bonds for its local employees — Seguridad Social does not know the URSSAF.

What the parent company keeps in France

The French company remains bound by its own obligations, to which the subsidiary adds a layer:

• Consolidation — as soon as the thresholds are crossed or an investor requires it, the Spanish accounts are included in the group's accounts, with conversion and restatements;
• Transfer pricing documentation — each intra-group flow (management fees, re-invoicing, loans, royalties) must be at a justifiable market price, on both sides;
• The Franco-Spanish tax convention of 1995 — it distributes the taxation of flows between the two States: our guide to France-Spain tax treaty details the mechanisms, including withholding rates.

The three pitfalls of intra-group flows

Management fees not documented. Invoicing your subsidiary for headquarters services is legitimate — provided that a contract exists, that the service is real and the price is defensible. This is the first point that the administrations, French and Spanish, control.

Mixed cash. Advancing money to your subsidiary without a cash flow agreement or interest rate transforms a management gesture into a tax risk. Each flow must have a status: contribution, documented loan, or invoice.

Improvised intra-community VAT. Invoicing between France and Spain follows the intra-community regime — reverse charge, valid VAT numbers, summary statements. A diet error costs both sides.

Who controls what: the distribution that works

On Franco-Spanish structures, the effective distribution is almost always the same:

• A Spanish gestoría or accountant maintains local accounts and produces Spanish declarations;
• The French accountant keeps the accounts of the parent company;
• A single financial department — internal or Fractional CFO — coordinates the two: consolidation, group cash flow forecasting, documentation of intra-group flows, and reporting that speaks to both administrations and investors.

This is precisely the configuration of our firm: based in Barcelona with a team in Paris and remote support or by agreement in Toulouse, our CFOs manage finance functions on both sides of the border — see our offer of outsourced financial management.

FAQ — Spanish subsidiary